Circulating capital includes

intermediate good Intermediate goods, producer goods or semi-finished products are Good (economics), goods, such as partly finished goods, used as inputs in the production of other goods including final goods. A firm may make and then use intermediate goods, or mak ...

s and operating expenses, i.e., short-lived items that are used in production and used up in the process of creating other goods or services. Mark Blaug, 2008. "circulating capital," '' The New Palgrave Dictionary of Economics'', 2nd Edition.
Abstract
This is roughly equal to

intermediate consumption Intermediate consumption (also called "intermediate expenditure") is an economic concept used in national accounts, such as the United Nations System of National Accounts (UNSNA), the US National Income and Product Accounts (NIPA) and the Europe ...

. Finer distinctions include raw materials, intermediate goods,

inventories Inventory (British English) or stock (American English) is a quantity of the goods and materials that a business holds for the ultimate goal of resale, production or utilisation. Inventory management is a discipline primarily about specifying ...

, ancillary operating expenses and (

working capital Working capital (WC) is a financial metric which represents operating liquidity available to a business, organisation, or other entity, including governmental entities. Along with fixed assets such as plant and equipment, working capital is consi ...

). It is contrasted with fixed capital. The term was used in more specialized ways by classical economists such as

Adam Smith Adam Smith (baptised 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the field of political economy and key figure during the Scottish Enlightenment. Seen by some as the "father of economics"——— or ...

David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist, politician, and member of Parliament. He is recognized as one of the most influential classical economists, alongside figures such as Thomas Malthus, Ada ...

and

Karl Marx Karl Marx (; 5 May 1818 – 14 March 1883) was a German philosopher, political theorist, economist, journalist, and revolutionary socialist. He is best-known for the 1848 pamphlet '' The Communist Manifesto'' (written with Friedrich Engels) ...

. Where the distinction is used, circulating capital is a component of (total) capital, also including fixed capital used in a single cycle of production. In contrast to fixed capital, it is used up in every cycle (raw materials, basic and intermediate materials, combustible, energy…). In accounting, the circulating capital comes under the heading of current assets. Building on the work of Quesnay and Turgot,

(1776) made the first explicit distinction between fixed and circulating capital. In his usage, circulating capital includes wages and labour maintenance, money, and inputs from land, mines, and fisheries associated with production.Adam Smith, 1776. ''Wealth of Nations'', Books II, ch. 1, 2, and 5. According to

(second volume of

Das Kapital ''Capital: A Critique of Political Economy'' (), also known as ''Capital'' or (), is the most significant work by Karl Marx and the cornerstone of Marxian economics, published in three volumes in 1867, 1885, and 1894. The culmination of his ...

, end of chapter 7) the turnover of capital influences "the processes of production and self-expansion", the two new forms of capital, circulating and fixed, "accrue to capital from the process of circulation and affect the form of its turnover". In the following chapter Marx defines fixed capital and circulating capital. In chapter 9 he claims: "We have here not alone quantitative but also qualitative difference." Conventionally, (physical) capital assets held by a business for more than one year are regarded in annual accounting statements as "fixed", the rest as "circulating". In modern economies such as the United States, roughly half of the intermediate inputs bought or used by businesses are in fact services, and not goods.

Notes

References

, ''The Wealth of Nations'' *

, ''Principles of Political Economy and Taxation'' *

, ''

'' {{Types of capital Classical economics Capital (economics) es:Capital circulante it:Capitale circolante